One of the big issues with the credit card business is fraud. Fraud is around 1% of all credit card transactions. Fraud tends to be higher on online payments where the "card not present" rate that merchants pay is higher than the "card present rate" enjoyed by brick and mortar stores.
In addition to fraud, credit card companies have to contend with the purchasing power of large companies (e.g., the Costco example ditching Amex) and also their own expenses as many people like concierge services and other "perks" that cost money and are becoming more standard on cards for people with higher credit and income.
In practice, it's fairly difficult to offer much of an incentive beyond 2% cash back (which Fidelity Amex and the Capital One Visa Spark Card offer). However; these cards are closer to being loss leaders for their institutions as they want to incentivize you to do your banking with them as well (Fidelity does this fairly well as the cash back must be deposited into a Fidelity account). Charles Schwab was the first to have a 2% cash back card many years ago and they discontinued it, likely because they lost money on it.
Travel-based rewards cards can get away with offering seemingly better incentives because of their margin. Starwood is a perfect example of this as hotels have a high fixed cost base and low variable cost base. The variable cost to stay at a high-end hotel is something like $50-60 per night if the room is vacant. So while Starwood seems to be paying out 2 cents on the dollar (e.g., 10,000 points for a $200 room), they are really only paying out 0.5 cents on the dollar. This is why the Starwood Amex is seemingly the best Credit Card. It's all about the economics of the company that brands it.
>>In addition to fraud, credit card companies have to contend with the purchasing power of large companies
For online transactions, credit card companies have -0- liability for fraud. 100% of the costs come from the merchant's pockets.
It's really a shame, because they are the ones with the broad access to data that would enable tools to reduce it. Of course, since there's no incentive on their end, nothing is provided.
> 100% of the costs come from the merchant's pockets.
I get that you're referencing the cash part of the transaction but the card companies still have to maintain code that detects fraud early, hire staff to support customers and investigate fraudulent transactions. That's not 0 cost to them.
>>still have to maintain code that detects fraud early, hire staff to support customers and investigate fraudulent transactions
In addition to sticking me with the bag for every online fraudulent transaction, they also levy an additional fee, which I assume offsets some or all of that cost. In fact, if it was a low-end purchase, they may make more on the chargeback fee than the original purchase.
I see no evidence of "code that detects fraud early", at least for online transactions. Any merchants ever get a call from a cc company, or issuing bank saying "hey, you know that transaction we approved a few days ago? you might not want to ship that." ? Nope.
But one other thing. Did you ever notice that there is no feedback loop where you can inform the issuer or bank that you have discovered a fraudulent charge? For what we do it's easy to spot a fraud charge. We void (or credit it) and move on (still a big pain of course). But the thing is there is no way to alert the credit card company (manually in some way or even by email) that we have figured out a card is stolen. Otoh, as a card user I've received calls from my bank from time to time when a particular purchase doesn't fit a pattern (and that pattern has never caught any fraud, only purchases that I have made).
The issuing bank is in business of keeping their cardholders happy not the merchants. That's just the reality of the situation. As a merchant however you have options to utilize the services of managed risk providers (obv there's an additional cost involved) to protect yourself from online fraud.
EDIT: some of these providers are either directly operated by or have very tight relations with cc networks so they do have access to enormous amount of data which they use to make their risk management decisions.
EDIT #2: at a risk of sounding like an ad - one example would be Cybersource who is owned by Visa.
>>you have options to utilize the services of managed risk providers
Helps a little, but they are, of course, still dealing with a tiny fraction of the available data out there, and the cost is pretty high.
For small to medium sized players you're much better off just doing what you can with AVS, CVV2 match codes, known freight-forwarder addresses, ip geolocation, etc. That's all free other than a bit of dev time.
It's just a shame that the kind of improvements that could be made with access to data only the CC companies and issuing banks have aren't ever going to happen.
> I see no evidence of "code that detects fraud early", at least for online transactions. Any merchants ever get a call from a cc company, or issuing bank saying "hey, you know that transaction we approved a few days ago? you might not want to ship that." ? Nope.
They definitely do do this. But when they see a likely-fraudulent transaction, they call the cardholder, not the merchant. I have received calls of this type.
>>when they see a likely-fraudulent transaction, they call the cardholder, not the merchant
Right. Which means the item gets shipped. Because...yep.
Edits: a) In the real world, the bank does not catch these things in between auth/capture. b) 3rd party companies are limited in what they can do. They don't have the full picture.
Not necessarily :)
If the bank calls the cardholder on file and the cardholder tells them the tx is not his they will at least reverse the auth so the merchant can't issue a capture against it when shipping the actual goods. In some cases they call them before the auth is approved.
But again the banks are not in business of protecting the merchant. There are companies that are in that business however and as a merchant you have an option to use their services.
All the UK card issuers I've used decline the transaction at my end and then contact me to verify I was trying to make that payment. Once that's done I can try again and the transaction will clear.
>For online transactions, credit card companies have -0- liability for fraud. 100% of the costs come from the merchant's pockets.
Which credit card companies are you referring to? If you're talking about issuing banks then liability for the fraudulent transaction is shifted towards the bank vs the merchant in some cases including card not present txs.
This will depend on a couple of things. 3DS for example shifts the liability towards the bank. Another example would be a payment facilitator entity handling fraud liability on merchant's behalf.
> One of the big issues with the credit card business is fraud. Fraud is around 1% of all credit card transactions. Fraud tends to be higher on online payments where the "card not present" rate that merchants pay is higher than the "card present rate" enjoyed by brick and mortar stores.
These are things that will change over time. 3DSecure is standard in Europe because the EU pushes transaction fees so low that credit card companies need to reduce fraud because they cannot afford it any more.
Do consumers all have little usb smartcard things so they can use the smartcard to make online purchases? or does this mostly just make 'card present' transactions that much safer?
3D Secure basically redirects you to a webpage run by a third party (usually your bank) to enter additional details, like a seperate password.
I find it much more annoying. My New Zealand (.co.nz) bank redirects me to a .co.uk domain with their logo (!!), where it doesn't even prompt me for any additional details, just forwards back to the original merchant.
It is likely that they are processing a risk score for your transaction, based on browser fingerprint, referer, ip, time of day and so on. That is, the "bounce" may not be entirely useless.
If the risk score exceeds a certain threshold then they can then require additional security. While this may seem very weak, in practice a lot of fraud has pretty obvious signatures.
huh. yeah, there's a 'verified by visa' thing that America has that is similar... I think it does some statistical something something. It sure looks a lot weaker than a public key transaction where the key never leaves the card. The 'verified by visa' site itself looks pretty fishy.
In theory, a chip and pin solution where the user owns the reader is more secure than a transaction in the store where the vendor owns the reader. but, I guess that's too expensive and inconvenient or something.
When 3dsecure just redirects it means the bank decided to trust the transaction based in something. For instance for me it skips it for some known vendors and transactions.
My Austrian bank embeds a 2FA system on the iframe. I get an authentication code on my phone and enter that. It typically asks that when shipping to a new address or dirst use of a vendor that uses 3dsecure
While 3DSecure and Verified by Visa is a good idea in theory, the implementation is a mess. For example, my bank requires me to enter my banking username and password into the banking website, which is loaded via an iframe inside the merchants site. How is a regular user supposed to verify that the iframe loaded his banking website and not some phishing website?
My bank is marginally better than this and includes a string I set when I first configured 3D Secure in the iframe, but its still a mess and asking for phishing attacks.
Sounds like a problem with your bank. Mine prompts me for a token that is sent to my phone where it also shows me what transaction i confirm. In addition the iframe pops up a memorable message I can configure to verify that it's a frame from the bank. Even in the absence of ssl this would be safe.
> In addition the iframe pops up a memorable message I can configure to verify that it's a frame from the bank. Even in the absence of ssl this would be safe.
No, they can do a replay attack on this setup when not encrypted
Sure, but that memorable message is not really all that useful on a non SSL page, but it's also not particularly important from a security point of view.
>>No, card fraud rates are in the 5-20 basis point range (0.05%-0.2%).
Depends on the "total pool" you're drawing from, and whether you're counting money, or transactions. The 5-20 basis points fits if you include, for example, all ATM withdrawals.
You get close to the 1% claimed in the parent if you count just "online card transactions", and count revenue instead of number of transactions.
Because in some places the fees are set by legislation. For instance in the EU the fees are so low that credit card companies are forced to combat fraud or they lose money.
For example, from the Fed: "By number, the fraud rate for general-purpose cards was 3.60 basis points (3.60 unauthorized transactions per 10,000 transactions) and by value the fraud rate was 8.27 basis points."
I should clarify, I was only talking about online payments, which I know a lot better than physical transactions.
From talking to some acquiring banks, I gathered that 1%-1.5% was the maximum fraud rate they would tolerate, depending on the value of your account. With fraud rates like that, you will not see volume discounts anytime soon either.
I wish people and broadcasters would stop using "basis points" and "three tenths of one percent".
Both of them are and sound ridiculous. As the above comment illustrates, are pointless because either people have to do the math to understand what the hell you are saying or you have to spell it out.
Not saying anything at all about the content or merit of your post, you, your family, neighbors, cousins, dogs or cats. Just saying this "financial" language is, well, kinda silly.
Some TV news anchors would have said: "five one-hundreds of one percent to two tenths of one percent". Or "half a tenth of one percent".
I hear you. I put both since I know the in-the-biz term, basis points, isn't universally understood. I feel like % can be confusing because 0.05 is 5% so putting 0.5% might not always be immediately understood.
My pet peeve is "quarter of a billion" to try to make the number sound bigger.
I guess my point may have been lost. There is no need to learn a new term. "1%" is read "one percent". "0.5%" is read "zero point five percent" or, shorthand, "point five percent".
How did we get from "zero point five percent", which is the literal value, to "one half of one percent", which imposes a cognitive load?
Or, better yet, why "one half of one percent" and not "half a percent"
It's like reading the number "1" as "one-hundredth of one hundred", or "10" as "one tenth of one hundred".
Question: Do they do the same in Europe? I must admit, I've been there tons of times but never paid attention to this (probably because I never watched enough TV while there). Of course, in Europe (and the rest of the world, as far as I know) it's "comma" not "point".
I can understand the use of basis points in some financial circles as a term of trade or convenient insider's unit. I don't understand it when used to communicate with the public. Go out there and ask a random sampling of people what a basis point is. I'll bet very few will say "0.01%", even if they own stocks.
I interned at MBNA, which was the independent credit card issuer (later acquired by BofA) known for its early, strong successes with "affiliate" cards, what are called co-branded cards here. The company's explanation for its success with these cards was the combination of an exceedingly low default rate with a relatively high usage rate.
The company's koolaid anecdotes included stories about people who would literally default on their mortgages before failing to make the minimums on their Dale Earnhardt card, and who were consistently indifferent to interest rates or annual fees relative to competing, non-affiliate cards they might have.
Are there any Credit Card companies, for that matter, are there any large companies at all without those clauses?
Telling people to avoid those companies is pointless - they can't.
This needs to be a matter for state law or the entire class action concept will no longer exist.
An idea I had: Mandatory arbitration clauses are null and void unless the contract was individually negotiated between the parties. Burden of proof on the party demanding mandatory arbitration. Automatic defenses: A lawyer was involved by both parties, or the contact is a singleton purpose written for that negotiation and not used with anyone else.
I've noticed that a many (certainly not all) contracts have an escape hatch for the binding arbitration portion, but it usually requires a timely act: American Express, for example, requires a letter to be sent to a specific address within 30 days (or some such) of opening the account to opt-out of the binding arbitration clause.
Citibank recently sent me a notice saying they were adding an arbitration clause. (What is a non-arbitration clause?) They gave me the option of opting out, which I did. I can still sue them in court if I wish. Most people won't read the letter they sent out.
I don't have any personal experience with MBNA, but I assume it means the agreement you sign forces you to use binding arbitration in place of suing MBNA. And being always right just means that basically MBNA will always in in arbitration. So you are stuck in a contract with a company you can't sue or win against if they break the contract.
That can't possibly be a legal contract. There are laws protecting people from fraud. Are you saying that the card company could perform neglectful or fraudulent behavior but not expose itself to suit? That would be laughed out of a traffic court.
Interesting info and highlights how powerful Costco has become. They continue to capture revenue streams outside of margin from actually selling goods (credit card bounties/rev-share, membership fees, etc.) and they presumably were able to get Visa/Citi to lose money on this deal. Visa set interchange fees at less than 0.4% (vs. 0.6% I believe for the old Amex deal).
These cards are also quite powerful from a psychological point of view.
e.g. I've got an assortment of cards on my - including some snazzy ones. Yet given a choice I use a british airways amex because there is a direct quantifiable link to something I can use (points for flights). Sure I know on a logical level those points are worth uhm not much but still the effect is strong.
>It means that Costco will also accept other Visa cards.
It depends on what you value. I use my BA Chase card exclusively, because with ~$100,000 worth of spending you can get a pair of RT BA First trans-Atlantic tickets for about the price of coach.
Are those "worth" the $10,000-$20,000 fare difference? Surely not, but to me they're worth more than the ~$2,000 I'd get from the best cash back cards.
These partner cards really are marketing genius, and a great way to capture more attention, dollars & loyalty from your best customers.
I have had almost no luck finding routes/dates that am ALLOWED to use my 500,000 Avios BA Chase points on:( Or my free companion tickets. And that's also not counting the insanely high Heathrow taxes/fees for all flights routed through London.
Pay an award booking service to find you the best flights possible. There are several out there, and they know a lot more than you about how to find obscure flights/routing. it's worth the $150.
In the US Costco, for credit card payments in the store or fuel pump, only accepts American Express. Cash, checks, and (I believe) debit cards are also acceptable in the store.
haha. Yeah its the exact opposite in Europe. Everyone accepts Visa & Mastercard but Amex is hit & miss like 50/50. And it mostly comes down to trying because the clerks don't even know if the PoS machine accepts it.
That is because AMEX charges much higher fees. At my dad's shop, it's about 3% while visa/master card is only 1.5%.m (I'm not 100% sure though).
Since my dad mostly has high volume purchase (and only one or two a day) the 1.5% can mean a lot. He also says doing business with AMEX is hard (if there was an error) because he gets ridiculously few purchase and they don't consider him valuable enough. And everybody who has a AMEX CC in Europa has a Visa or master card as well.
That does seem to be true mostly. Shop near has the opposite though - Amex card use is free but for Visa & Mastercard there is a surcharge. Thought that was a bit weird.
Nice article! Anybody who's been in the Credit Card business - either from the issuing side or from the Merchant or Network side knows this stuff. The author has done a good job summarizing the details without disclosing information that may be considered confidential
Is it normal in the US for a business like Costco to accept only one type of credit card? Here where I live there are branded cards but businesses still accept cards from all issuers.
Actually the interchange does not vary per issuer.
It can vary per card type (pre-paid, debit or credit), card level (basic or signature/elite, etc.), type of transaction (CNP or present), Merchant type (supermarket, airlines, etc.) and some other rules, depending on the scheme and the region (US, Europe, etc.).
For instance the Interchange (to be paid to the Issuer) when a US issued MasterCard Debit Card is used in Gas Station is 0.70% US$ + 0.17 with a cap of US$ 0.95, but when used in a Restaurant is 1.19% + US$ 0.10 without caps.
Debit cards from big banks are covered by the Durbin Amendment which fixes the interchange to 0.05%. Smaller banks are regulated by Visa/Mastercard rules on interchange.
I find it interesting that they've chosen to partner with different vendors (and different card networks) in other jurisdictions - here in Canada, the new Costco card is a MasterCard in partnership with Capital One.
I have been contemplating creating a new credit card the last few years. Most likely under the Visa or Mastercard line.
The thought is, create a reward card specifically for high-value/vips that has the best rewards/cashback program on the market. Currently the best card is the SPG card from Amex which gives points that can be transferred to a plethora of partners and are among the most valuable points of all cards (around 2.9cents per point). What surprising is the cards currently for high-worth users have terrible rewards programs, ie the amex black card.
If you created a new card, the hope would be that you could offer more rewards to transfer partners by upselling 'these are vips' you should compete to get them.
The challenge is in figuring out how to make it all work. Credit cards make money 2 ways as far as I can tell- The 2.9% + 30cents on every transaction, as well as the interest paid on their bill.
So you should ideally have at least 3% of every transaction to give back to the user in rewards while living off of the 30 cents per transaction. Hopefully the interest paid on debts breaks even with the defaults.
I feel like you need to do a lot more research into this.
There's a reason that the highest value cards don't generally offer more than around ~2.3%. You do not receive 2.9% on every transaction, and you need some of that margin to cover your expenses.
It seems like your business model is somehow trying to market your customers to transfer partners in exchange for better rewards, but that's just not how it works. The merchants are generally the ones in the driver's seat. As the article points out, they have relationships with customers and they're the ones actually offering compelling high-end rewards. All you are is a random other issuer—you have to compete to get them, not the other way around. (AmEx just lost that competition to Citi.)
If you're targeting higher end purchases, the 30 cents is meaningless.
I expect there's a reason that Amex's high-end credit cards are light on rewards and heavy on benefits: people in those income brackets don't really care about getting an extra percent back on their credit card bill.
I doubt it's because they don't care, more like the cost of a concierge service/personal shopper, free airline tickets, etc all end up being MORE than 1% of their credit care bill. And they are probably buying those things either way.
The merchant's bank collects 2.9% + 30 cents (in this example). A portion of this is transferred to the issuing bank.
The amount transferred is called the Interchange Fee, and it is significantly lower than that amount. There are different fees depending on the card type, credit/debit, rewards, business cards, etc.. and they are set by Visa/MasterCard/etc. Discover and Amex have more latitude here, since they are both the issuing and acquiring bank... but if they raise fees too high, merchants will just stop accepting their cards.
Interest from the card balance is kept by the issuing bank.
So you see, revenue from credit cards is divided between multiple parties...
Precisely. From my experience (in developing countries where the interest is very high) the banks makes much more money from the defaulting. The exchange merely pays the costs.
This is a deep misunderstanding of interchange - you don't get anywhere close to 2.9% + $0.30 a transaction. First of all, only the online processors even charge that, in person it's usually 1.9% ish. Second of all, a cut goes to a bunch of people in the chain.
The money for rewards comes from interest on debt. Capital One made ~10x more on debt than interchange for instance.
It depends on the business model. CapOne is basically a predatory lender making money off people who can't pay off their debt. Amex makes money from its high value customers and the interchange fees. Amex's fees are higher, and many of their cards are charge cards (which don't even have an interest rate because they must be paid in full every cycle).
> What surprising is the cards currently for high-worth users have terrible rewards programs, ie the amex black card.
There's a big assumption built into your idea here.. what if the high-worth people don't care about the rewards programs? I assume (no data) that their net worth is high enough that a few percent on the little (in their mind) on their card isn't worth shopping around or even thinking about it.
What you then do is target the perks to be something this hypothetical person would want, which is likely time. If they can save time with your card's perk over that of another card, you win them.
Or make the perks special services, rather than monetary rewards. For instance, I've heard of many high-end cards that provide general-purpose concierge services with membership.
At least they used to. I got a notice last year that the concierge service and some other access program were dropped and things like late fees were increased. At one point, it had a rewards program that they also discontinued and frankly I'm not sure whats left as a benefit on the card. Need to shop for a new card I guess but I hate changing card numbers and updating every website.
In the EU this business model has been gutted by regulatory changes which have pretty much fixed the percentage fee at such a low level that there is no margin to offer rewards.
> Hopefully the interest paid on debts breaks even with the defaults.
Well, fundamentally it must do otherwise the business model for CC companies is pot. Actually, the core for any CC is, of course, the data scientists who build the risk models to work out that red line.
> So you should ideally have at least 3% of every transaction to give back to the user in rewards while living off of the 30 cents per transaction.
From that you have to pay the bills, and of course MC/VISA take a cut too. Don't get me wrong; it's totally fine to work with that 3% but...
a) it's a fixed part of any transaction, which is a pretty dependable to get in your coffers (as opposed to, some money each month for your customer which you might not get depending on their circumstances)
b) it would be very easy for this fee to get regulated (as in the EU) and thus kill your business model. Lots of risk there.
Not to put you off. I think there is definitely innovation worth doing in that space.
> I have been contemplating creating a new credit card the last few years.
Takes an insane amount of money (because; you have to front a lot of "cash" to your customers in the form of credit, obviously). I'd be super interested if you do this because (having recently started working at a CC company) there is a lot of innovation to do in this space!
> In the EU this business model has been gutted by regulatory changes which have pretty much fixed the percentage fee at such a low level that there is no margin to offer rewards.
Thank goodness. I only hope we can do this in the US. The amount of time, money, and human creativity that goes into complicating what should be a simple business--transferring money--is absurd.
Were it in my power, I'd also make consumer loans and money transfer two entirely separate businesses. If somebody wants to buy stuff without hauling around cash, great. And if somebody wants to consciously go out and get a consumer loan, also great. But conflating these functions takes advantage of cognitive biases to trap people in debt.
From my perspective, SPG was the best rewards card of 2007. It's the best overall rewards offered by American Express, but there are better cards. It, of course, depends on your spending habits but off the top of my head, I'd opt for Citi Prestige or Chase Sapphire over SPG.
Besides, people who want to maximize rewards will specialize. BCP for 6% back on groceries, Sallie Mae for 5% on Amazon and Gas (discontinued), Prestige for 5% back on travel, Ink for 5% back on utilities, Discover and Freedom for their rotating 5% categories and great online cashback, and finally something like Citi DoubleCash for 2% on everything else. A single general-purpose card can't compete with a stable of specialists. And if somebody lacks the spending to support ROI on several cards including some with annual fees, that person is not the lucrative VIP you're after.
If you missed that sallie mae card, you can get amazon's house card for a flat 5% statement credit directly applied each statement. It's zero hassle. There's no reason to choose the 3% amazon chase card.
Also, I simply can't figure out how amex makes money on the bcp. I hit the full $6k of groceries and just use it for groceries and gas.
I don't know, but I do know that in my pocket my wallet is a simple iphone sleeve and I keep my ID, transit card, and only 2 credit cards -- and BCP is one of them. The giant credit line and secondary benefits like roadside assistance just gives me a peace of mind in American Express. A friend once needed an air ambulance in central america and the pilot wouldn't fly without guarantee of payment -- Amex approved a $30k authorization over the phone with the pilot on his PRG. Also, they've always been on my side in disputes. I had an issue with Stamps.com, i was busy, i waited months to resolve it, i didn't ask for it all to be refunded but it just was.
I imagine that brand loyalty will be worth it for Amex in the long run, but i'm certainly coming out ahead for now.
oops, you're totally right, but if you have the level of amazon spending that justifies prime, this basically makes prime free at the price of remembering to pay that card off one a month...
An extra 2% cashback means you need $5000 a year to justify it. However, both Discover and Chase Freedom occasionally have a 5% quarter for Amazon (freedom had 10% last 4Q for a few weeks), limit $5000, so you really need to be spending more to justify it.
Edit: also, anyone using a credit card should have autopayments set up. Unless you're extremely organized and have a good reason to do otherwise.
If you spend roughly 2-3k like I do, you can view it as a 50% discount on prime. And the discount can be increased if you accept their $1 credits (per item if you check them out individually) for not using 2 day shipping for stuff that isn't urgent, which can now be spent on kindle books too...
Setting up autopayments to pay the minimum on the day before it's due is definitely worth doing just in case anything slips your mind.
I don't like autopayments, because I need to log in at least once a month to check my statement anyway, to make sure there are no unauthorized charges (or restaurants charging the wrong amount, etc.). Once I check the statement, then I pay. As an added bonus, the payment status (is the statement balance $0?) serves as a flag to tell me whether I've checked this month's statement yet.
You can still use it as a failsafe. Schedule it to kick in on the last possible day, that way if you pay earlier nothing happens, but if you forget there aren't fees and negatives on your report.
Or just have them send emails for new statements, and don't archive/delete the email until you've looked through the transactions.
I'm a huge fan of credit card points hacking. I've probably redeemed over $100k in free travel in last 4 years between flights and hotel stays. The avg user acquisition cost for these issuers must be over $800-$1000
How do they get away with it? I've seen credit card agreements where the company reserves the right to close the account and remove accumulated rewards. I'd think it be really easy to flag those accounts and have the customers banned.
Edit: the comments talk about it more and it looks like those people were probably using multiple cards spread across multiple family members, or also using smurfs.
Shut downs are pretty rare but do happen. Biggest mass shutdown I've heard of was with a unlimited 5% cash back card at drugstores, grocery stores, and gas stations. People would buy $100k+ a month in visa gift cards at CVS and net $4-5k a month in tax free cash back.
It's a hobby for some people at the cost of time and the risk that they'll miss some fine print and end up with gift cards or whatever that don't have any value. (Or they end up spending money to get rewards that they wouldn't have otherwise spent.)
Far be it from me to criticize anyone's hobby. With good credit, it does make sense to have a few credit cards that provide incentives lined up with your needs and spending patterns--especially if you do a lot work-related spend. But beyond that, I can't personally be bothered.
The benefit to the co-brander is "many folds"? I'm not familiar with this term and nothing in the dictionary made sense. Is this industry lingo or the author's inability to bother editing and reviewing the piece?
I believe the author speaks English as a second language. Googling his name brings up a page describing him as an immigrant and his writing supports this theory in certain places.
I suspect you could have pointed the mistake out in a more tactful way. He knew what he wanted to say and he used two valid words, he just didn't know to make it a compound word and this would be easy to miss when self editing.
Manyfold, is one word, no space between many and fold. I bet you are right about the author's intent. I know you are right that it does not read sensibly. Thank you for responding, for some reason "manyfold" did not come to mind when I read the article.
My wife and I flew business class from SFO to Greece last year, airfare that would've cost $25k to book cost us $2k cash and the reward points from about 18 months worth of spending. In this case, it was on British Airways co-brand card that gave us 100k mile bonuses (to each of us). One $11.5k business class ticket ran about 190k miles, and we earned a companion pass for spending $30k on the card in a year. (The flight was great, and combined with the BA lounges saved us from the schlep).
Most of our spending is on cards that earn cash (or cash-redeemable) rewards but I love to take advantage of big bonuses on co-branded cards. We also earned 250k AA miles, 100k from a bonus on a new card, and the rest from US Airways cards that Barclays was giving away to burn thru their cache of prepaid miles ahead of the AA merger. I cancel the card the following year before the annual fee hits -- or not, because often it's waived for a second year. Don't get crazy and it doesn't impact your credit.
In addition to fraud, credit card companies have to contend with the purchasing power of large companies (e.g., the Costco example ditching Amex) and also their own expenses as many people like concierge services and other "perks" that cost money and are becoming more standard on cards for people with higher credit and income.
In practice, it's fairly difficult to offer much of an incentive beyond 2% cash back (which Fidelity Amex and the Capital One Visa Spark Card offer). However; these cards are closer to being loss leaders for their institutions as they want to incentivize you to do your banking with them as well (Fidelity does this fairly well as the cash back must be deposited into a Fidelity account). Charles Schwab was the first to have a 2% cash back card many years ago and they discontinued it, likely because they lost money on it.
Travel-based rewards cards can get away with offering seemingly better incentives because of their margin. Starwood is a perfect example of this as hotels have a high fixed cost base and low variable cost base. The variable cost to stay at a high-end hotel is something like $50-60 per night if the room is vacant. So while Starwood seems to be paying out 2 cents on the dollar (e.g., 10,000 points for a $200 room), they are really only paying out 0.5 cents on the dollar. This is why the Starwood Amex is seemingly the best Credit Card. It's all about the economics of the company that brands it.